FBD Holdings plc has announced that it has entered into an agreement pursuant to which Fairfax Financial Holdings Limited will invest €70m in FBD through a private placement of a convertible bond instrument.
The transaction will be subject to FBD shareholder approval.
The Convertible Bond will be a 10-year Solvency II compliant instrument and it will carry a coupon of 7.0% per annum which will be payable semi-annually.
The conversion price has been set at €8.50, a 37% premium over the closing share price on 15 September 2015.
Unless previously redeemed, the Convertible Bond will be exercisable from year three to year 10 and, in the event that the 30-day volume weighted average share price exceeds the conversion price for a period of 180 days, the Convertible Bond will automatically convert into ordinary shares in FBD at the conversion price.
The issue of the Convertible Bond to Fairfax is subject to the execution of a final, definitive agreement between the parties and shareholder approval.
As an interim stage in this transaction, agreement has also been reached with Fairfax, that FBD Insurance plc will today issue at 12% per annum, €70m, 10-year, tier 2 instrument to Fairfax.
The Tier 2 Debt Instrument will be exchanged for the Convertible Bond within seven days of Group shareholders approving the issue of Convertible Bond.
Interim Chief Executive, Fiona Muldoon, said it was a “significant vote of confidence” in FBD and its future success.
“I am confident that the completion of this transaction helps our business plan with our core farming and small business customers and with our consumer customers also. It underpins the Board’s strong commitment to maintain healthy capital buffers as we prepare for the implementation of Solvency II.”
Prem Watsa, Chairman and CEO of Fairfax said it was delighted to become an investor in and partner to FBD.
“We have been a long-standing follower of FBD and its deserved reputation as a leader in the farm insurance sector in Ireland. This investment underlines our belief in the strength of Ireland’s on-going economic recovery and in FBD’s core franchise in the farming and agri-business sectors.”